The Final Four and the Economic Impact on the Host City

The NCAA tournament marks a time filled with excitement for fans and hope for players. It also introduces numerous economic effects for the cities that play host to the event. Surprisingly, the host of the “First Four,” Dayton, performs better than that of the major city that welcomes the Final Four every year. There may be many factors for this result, but it seems as though the lesser attention paid to the first games is a blessing for the city in Ohio.

Games are played at the University of Dayton, which makes economic sense as a gym is already accessible and therefore taxpayers’ money does not need to be put towards infrastructure. Instead it would appear that the flood of tourists to the city benefits the economy. Governor John Kasich is a strong supporter of hosting the First Four in the state of Ohio every year. He claims that the event is, obviously, fun for fans and is a “big economic boost for Ohio.” The beginning of the tournament was set to bring in $4.5 million in direct spending for the city, which clearly assists the economy. The small business owners appear to love the attraction as they see spending in their bars and restaurants increase severely during the time of the games.

first four

For a small city in Ohio the results of hosting seem to be beneficial, but for large host cities of the Final Four it is the opposite. Surely the economy experiences a boom as the tourists roll in ready to experience the city they are in and watch college basketball; but at what cost? The individuals that experience the negatives are the taxpayers for the cities that play host. For it is these citizens that see an economic decline of roughly $44 million in loss of income. Public subsidies end up paying for the event to take place and in return they get their city crowded with unwanted tourists. Of course the city is then nationally advertised through the large TV network deals, but the money for these deals does not go to the city directly nor does most of the other economic surges. Therefore the substitution effect arrives, as suggested by Pat Garofalo and defended by Professor Matheson. It becomes clear that residents do not reap in the benefits of hosting the event and other tourists are hesitant to bring their money to the city as both seek to remain away from the “hoopla.” Therefore the city experiences a negative effect when it comes to an economic surge.

So if the city that plays host does not benefit from the tournament then who does? The NCAA. The organization brought in $1 billion in March of 2016. This is because the money that is brought into the cities that host the Final Four does not stay in those cities. Instead it is shipped out to the likes of schools competing and other organizations. The University of Kentucky, for example, gained $8.2 million for making it the Final Four. Our own Holy Cross basketball team brought the school millions for just making the round of 64. Thus the city hosting does not see the majority of the money from deals such as the $10 billion deal wit CBS and Turner to air it nationally, nor do they see the $1.5 million paid for just 30 seconds of ad time. So the real winner at the end of the title game remains to be the NCAA through their exploitation of cities and student-athletes, among other things.

lucas oil

The cities of Houston, Indianapolis, and Phoenix do not reap the benefits that the American public thinks they do; for when April comes and the nets are cut down the cities are left with taxes in order pay for the large subsidies that were required for such an event to take place. The outcome may be different for a city like Dayton in which the arrival of new business is a regularity every year in March, but for the city that plays host for one year and needs to grant subsidies in order for the preparation of such a grand event it does not leave the normal taxpayer in a good position. Thus it would appear that the economic outcome of hosting the Final Four is not worth the hassle nor is it worth the spending of the public’s money for a negative feedback.

-Luke Madden

https://www.forbes.com/sites/simonogus/2016/03/17/the-economic-impact-of-the-ncaa-basketball-tournament-from-first-four-to-final-four/#322fe7451b56

https://www.usnews.com/opinion/blogs/pat-garofalo/2015/04/04/taxpayers-lose-the-ncaa-final-four?int=opinion-rec

http://www.daytondailynews.com/business/march-madness-ncaa-first-four-spur-economic-growth-dayton/xN7SZ1pMBsD5FL8URdCyaM/

http://www.bizjournals.com/dayton/news/2014/07/09/dayton-s-hosting-of-2014-ncaa-first-four-biggest.html

http://www.seattletimes.com/sports/ncaa-tournament/hosting-ncaa-tournament-games-has-tangible-benefits/

http://www.investopedia.com/articles/investing/031516/how-much-does-ncaa-make-march-madness.asp

Advertisements

2 thoughts on “The Final Four and the Economic Impact on the Host City

  1. laurenlyman4

    It is odd to think, but does indeed make sense that the large cities that host the tournaments every year do not benefit from it. These cities are large cities that already bring in the tourist revenue on their own and all the publicity of their city does not go towards them. As you showed, Dayton is not a city that brings in many tourist and yet has the infrastructure already there. It is crazy how the “First Four” host city can have a larger benefit than the Final Four host city.

    Reply
  2. Victor Matheson

    What really matters is how much public money needs to be put into hosting the event. If you use an existing facility and hosting costs are small, bring on those events. If you needs millions in security and hundreds of million in infrastructure for new sports stadiums, then run away.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s